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Resource management

Posted 27/03/2014 by sevans

Meeting increasing demand means improving our resource productivity – dramatically – according to Stefan Heck and Matt Rogers. Writing in the McKinsey Quarterly (March 2014). Heck, a consulting professor at Stanford University’s Precourt Institute for Energy, and Rogers, a McKinsey director in San Francisco, point out that the annual productivity improvement required to meet global demand over the period 2010-30 amounts to 1.3% GDP/t for materials in general; a 1.5% increase in food yield/hectare; 3.2% GDP/Btu in terms of energy; and 3.7% GDP/m3 for water.

They point out, however, that the heat-rate efficiency of the average coal-fired power station, still a major source of electricity in the US, has not significantly improved in more than 50 years, and automotive fuel efficiency improvements have consistently lagged behind productivity growth across the US economy. 

‘Under-utilisation and chronic inefficiency cannot be solved by financial engineering or offshoring labour’, they write. ‘Something more fundamental; is required. We see such challenges as emblematic of an unprecedented opportunity to produce and use resources far more imaginatively and efficiently, revolutionising business and management in the process.’

They have looked back to 1776, and Adam Smith’s The Wealth of Nations, pointing out that out of the three primary business inputs that Smith identified: labour, capital and land – or broadly any resource that can be produced or recovered, or disposed of as waste on land – the two industrial revolutions that have occurred so far have focused primarily on labour and capital, but neither focused on land and natural resources.

This is arguable, since the more recent industrial revolution focused on crude oil, and latterly gas, both natural resources extracted from the land, and sea. They are, however, supporters of the concept that the third industrial revolution involves IT, nanotechnology and biology, which they believe can yield substantial productivity increases. They also cite the achievement of high productivity growth in the developing world as offering the largest wealth-creation opportunity in a century.

‘Rather than settling for historic resource-productivity improvement rates of one to two percent/year, leaders must deliver productivity gains of 50% or so every few years,’ they believe, but this will require new management approaches. 

They lay out five distinct approaches for business to capitalise on this revolution in a new book: Resource Revolution. These are substitution, replacing costly and or scarce materials with less scarce, cheaper and higher-performing alternatives; optimisation, by embedding software in resource-intensive industries to dramatically improve production are scarce resource utilisation; virtualisation, or moving processes out of the physical world; circularity, or finding value in finished products after their initial use; and waste elimination, through greater efficiency and redesigning products. 

So nothing really new then – and the green chemistry movement already has most of these approaches covered. Perhaps the chemistry, the chemical industry and its customers are ahead of the game after all. What do you think?

Neil Eisberg - Editor

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